EC has approved, under the EU State Aid rules, the prolongation of a Danish resolution scheme for small banks with total assets below EUR 3 billion for 12 months, until January 28, 2022. The scheme is intended to facilitate the liquidation of small banks by the Danish resolution authorities, should the need arise. The scheme was originally approved in September 2010 and has been prolonged and amended several times, most recently in August 2019. The measure will continue to be open to banks that are found to be in distress by the competent national authorities.
The notified scheme is designed to comply with State Aid rules and rests on the Act on Restructuring and Resolution of Certain Financial Enterprises (DARR) of March 31, 2015, which also forms part of Denmark's transposition of the Bank Recovery and Resolution Directive (BRRD: 2014/59/EU). Under the DARR, as of January 01, 2015, the Danish Financial Stability Company (FS) was appointed as resolution authority in Denmark together with the Danish Financial Supervisory Authority (DFSA). The framework granted FS a number of responsibilities and powers in addition to its existing resolution tasks. As resolution authority, responsibilities of FS include preparing resolution plans for all Danish banks, restructuring or winding up distressed businesses, and management of the Resolution Fund.
The objective of this prolonged resolution scheme is to facilitate the orderly market exit of small banks through a sale or wind-down process, whereby they cease to exist as a market competitor. To this end, FS will provide State support for the recapitalization of the institution under resolution with funds from the national Resolution Fund in case the capital requirements set by the supervisor are not restored by the bail-in. The injection of State funds will only take place after the bail-in of shareholders, subordinated debt holders, and other liabilities in accordance with the provisions of Article 44 of the BRRD, as implemented by sections 24 to 28 of the DARR. Larger banks—those with total assets above or equal to EUR 3 billion—will not be covered by the winding-up scheme and will, therefore, require individual prior notification for assessment and authorization by EC before the support can be implemented. At the end of 2018, 58 credit institutions in the country were expected to be eligible under this scheme.
Keywords: Europe, Denmark, Banking, Resolution Framework, State Aid Rules, BRRD, Small Banks, DFSA, EC
Previous ArticleOSFI Note Explains Assessment of Internal Models Under CAR Guideline
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.